Prepayment Penalties in Commercial Real Estate
In commercial real estate loans, a prepayment penalty is a fee charged to borrower if they attempt to repay their loan early. When a lender issues a loan, they typically want to lock in their profit for a certain amount of time, so the prepayment penalty is a way to compensate them for their financial loss if the loan is paid off early.
Lockouts in Commercial Real Estate
A lockout is a restriction within the commercial real estate loan to prevent the prepayment of the loan. If the loan is paid early, then the lender will not benefit from the anticipated yield of the loan.